Have equity in your home? Want a lower payment? An appraisal from Vestal Appraisal Solution can help you get rid of your PMI.
It's largely understood that a 20% down payment is accepted when purchasing a home. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower defaults.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Vestal Appraisal Solution, we're masters at identifying value trends in Houston, Brazoria County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: